Ontario Securities Commission Proposes Whistleblower Program

November 30, 2015 | Kevin J. Sorochan

On October 28, 2015, the Ontario Securities Commission (the “OSC”) announced the release of its proposed whistleblower program, OSC Policy 15-601 (the “Policy”). When implemented, the Policy will be the first of its kind in Canada and will follow in the footsteps of the whistleblower program introduced in the United States by the Securities and Exchange Commission in 2011.

The aim of the Policy is to encourage individuals to report information to the OSC regarding serious misconduct related to the securities and derivatives markets in Ontario, and in particular, violations of the Securities Act (Ontario) and the Commodity Futures Act (Ontario). The Policy is to be implemented pursuant to the OSC’s mandate to provide protection to investors and to foster fair and efficient capital markets.

Under the Policy, an eligible whistleblower will be entitled to receive an award of 5-15% of the total monetary sanctions imposed or voluntary payments made pursuant to an order of the OSC. The payment of an award is limited to those cases where substantial sanctions are imposed, which is consistent with the aim of targeting serious misconduct. In particular, no award will be paid unless the sanction or payment amounts exceed $1,000,000. Any award will be capped at $1,500,000, unless the sanction or payment amounts exceed $10,000,000 and such amounts have been collected by the OSC, in which case the maximum award is $5,000,000. Ultimately, the amount of the award and whether an award will be paid is at the discretion of a committee of OSC staff. OSC staff may consider number of factors in determining the amount of an award, including: the timing and quality of a whistleblower’s report; the significance of information provided; the degree of assistance provided by the whistleblower; the impact on the investigation of the information provided; any unique hardships suffered by the whistleblower; and the culpability of the whistleblower in any violations reported.

The Policy defines a whistleblower as any individual, or group of individuals, who voluntarily provide information relating to a violation of Ontario securities law that has occurred, is ongoing, or will occur. Pursuant to the Policy, subject to certain limited exceptions, the OSC will make all reasonable efforts to keep confidential the identity, and information that may reveal the identity, of whistleblowers. In addition, the Policy provides that whistleblowers may submit information anonymously through legal counsel. Prior to the payment of any award, the OSC will generally require that whistleblowers confirm their identity in order to ensure the whistleblower is eligible.

Not all whistleblowers will be eligible for an award. Notably this group includes external legal counsel (unless permitted by law society rules), OSC staff and family members, those who have been convicted of a criminal offence in relation to the subject matter reported and those who make misleading or untrue statements to the OSC. Internal legal counsel, internal and external auditors and investigators, directors, officers and compliance officers of entities that are the subject of a whistleblower submission will only be eligible for an award in circumstances where: they believe the disclosure of information to the OSC is necessary to prevent conduct that would be likely to cause substantial financial injury to the entity or investors; they reasonably believe that an investigation of misconduct would otherwise be impeded; or when at least 120 days have elapsed since the whistleblower provided the information to the relevant entity’s audit committee, chief legal officer or other equivalent supervisor.  The Policy also establishes criteria relating to the internal reporting of information. It is worth noting that culpable whistleblowers remain eligible for an award depending on the degree to which they were complicit in the violation of Ontario securities laws.

In addition, in order to be eligible for an award, information provided by a whistleblower must be original information obtained from a whistleblower’s independent knowledge or critical analysis of public information. Information cannot have been obtained as a result of a communication that was the subject of solicitor-client privilege or otherwise in connection with the provision of legal advice to a client or employer. Information obtained by means or in a manner that violates criminal law will also not be eligible for an award. Any information must have been voluntarily submitted, be of high quality and be sufficiently timely and credible. Finally, information submitted must provide meaningful assistance to the OSC in investigating the matter and obtaining an order for monetary sanctions or voluntary payments.

The Policy is open for public comment until January 12, 2016 and the OSC aims to have the program in effect in the spring of 2016.


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